Insurance Broker Sentenced to 15 Years in State Prison for Stealing $2.6 Million from Perth Amboy Schools by Submitting False BillsBroker also billed City of Perth Amboy $216,495 for a bogus wellness program

TRENTON – Attorney General Jeffrey S. Chiesa announced that a Maryland insurance broker was sentenced to state prison today for stealing nearly $2.6 million from the Perth Amboy Board of Education by submitting fraudulent bills, and also stealing $216,495 from the City of Perth Amboy by collecting payments for a non-existent “wellness program” for city employees.

Francis X. Gartland, 71, of Baltimore, Md., was sentenced to 15 years in state prison, including 7 ½ years of parole ineligibility, by Superior Court Judge Bradley J. Ferencz in Middlesex County. Gartland pleaded guilty on April 10 to first-degree money laundering, related to the $2.6 million fraud against the school district, and second-degree theft by deception, related to the fraud against the municipality. Ferencz sentenced him to 15 years in state prison on the money laundering charge, including 7 ½ years of parole ineligibility, and a concurrent seven-year sentence on the theft charge.

The charges were contained in two separate indictments obtained in 2010 as a result of an investigation by the Division of Criminal Justice Corruption Bureau. Deputy Attorney General Pearl Minato took the guilty pleas and handled the sentencing.

“This crooked broker stole millions of dollars from the Perth Amboy School District, which needed the money to educate its children, and he also stole from the City of Perth Amboy,” said Attorney General Chiesa. “This is the worst type of corruption, driven by greed and bounded by no evident moral restraints.”

“School districts and municipalities across New Jersey – and the taxpayers who fund them – must pay out millions of dollars each year for insurance,” said Director Stephen J. Taylor of the Division of Criminal Justice. “The last thing they can afford is dishonest insurance brokers who jack up the cost by millions more to enrich themselves. We will continue to work hard to eliminate such corruption.”

Several companies operated by Gartland also pleaded guilty on April 10: Gartland and Company Inc. and E-Administrative Systems Inc. pleaded guilty with him to the money laundering charge; and Federal Hill Risk Management LLC pleaded guilty to the theft charge. Gartland and his companies are permanently excluded from government contracts in New Jersey. Gartland and the companies were ordered to pay restitution of $2,593,400 to the Perth Amboy Board of Education, and $216,495 to the City of Perth Amboy. They must also pay penalties totaling $8,429,400 and a fine of $500,000.

Regarding the Perth Amboy Board of Education, Gartland and Company was the broker of record for health benefits insurance for the board and was authorized to act on the board’s behalf with its medical insurance carrier. Gartland admitted that between November 2003 and July 2009, he conspired with the other defendants named in the indictment to fraudulently obtain $2,593,400 from the board of education by charging it for nonexistent or unauthorized healthcare related programs and services, including wellness programs and employee assistance programs.

Gartland admitted that they falsely represented to the insurance carrier that the board of education authorized the insurance carrier to pay fees on behalf of the board from its medical claims bank account for the programs and services. The defendants submitted fraudulent and forged board authorization letters and fraudulent billing invoices from vendors to the insurance carrier resulting in payments from the board’s medical claims bank account.

Regarding the City of Perth Amboy, Gartland’s company, Federal Hill Risk Management, was formerly broker of record for health care insurance for the city. Gartland admitted that between January 2005 and July 2009, he and the other defendants named in the indictment conspired to fraudulently obtain $216,495 from the city by making false representations to the city’s medical insurance carrier. They represented that the city had authorized the insurance carrier to increase the city’s insurance renewal rates beginning Jan. 1, 2007, by a $15 per employee per month fee to cover the cost of a wellness program. Wellness programs typically offer services such as health care counseling and fitness training aimed at reducing long-term health problems and costs. In this case, there was no wellness program.

Another corporate defendant, East Coast Administrative Services Inc., which was charged in the fraud against the City of Perth Amboy, pleaded guilty to second-degree theft by deception. The company paid $191,304 in restitution and was sentenced to probation on June 28, 2012. It was ordered to be permanently barred from public contracts.